Step 2: Using The $1000-A-Month Rule To Get A Rough Estimate Of Nest Egg Needed

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With no clear reason to prefer higher or lower rates, John plans to draw 3.5% of his nest egg in year 1 of his retirement, and update that dollar amount each year thereafter to account for inflation.

John has some time on his side.For every dollar he invests annually, assuming the same historic average of 10%/year returns, he expects to end up with $98 in 25 years.

John’s example gives you a step-by-step method to figure out how to use the corrected $1000-a-month retirement savings rule to figure out how much you should invest each year for retirement.